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France

The contradictions of Hollande

IN THE RADICAL PRESS / IL MANIFESTO

By Joseph Halevi

Let’s try to overcome the hypnotic effect that the French left usually exercises over its Italian counterpart and figure out if a Hollande’s programme has feasible. The main points of the programme of the Socialist president-elect are to achieve a balanced budget in 2017 after reducing the public deficit to 3% of gross domestic product (GDP) next year. Within these objectives Hollande proposes to create 150 000 “jobs of the future,” evidently in key sectors and occupations, and to bring the retirement age down to 60, the level at which it stood until 2010 when Sarkozy raised it to 62.

The funds for this should come from a tax of 45% on incomes over €450,000 per year and 75% for those over one million euros. Income tax will be increased by 0.1% per year to fund pension liabilities and the tax on banks’ capital gains will be increased by 15%….

Hollande’s programme is not compatible with the Fiscal Compact because the former provides a balanced budget over a much longer time period than the agreement signed by 25 European Union countries earlier this year.

However, the objective of budget balance in 2017, compared to Sarkozy’s plan to reach it in 2016, accepts the principle of zero deficit but brings it forward…

What of the programme of the  French president-elect on taxes? Perhaps few people know it but the revenue from income tax represents less than 20% of total net state revenues, while the tax take from companies is under 14%. It follows that the bulk of tax revenue in France, 49% of the total, originates from valued added tax (VAT), a highly regressive tax. This weight of VAT in the overall tax take is structural, having been promoted and pursued for many decades by the governments of the Right and the socialists.

This means that the taxation of the rich touted during the presidential campaign will not mean much change to the composition of revenues, which will continue to rely on VAT. To corroborate the suspicion that taxing the rich is a diversion was the fact, too little known, that as many as 45% of French families are exempt from a tax on incomes, of which 80% do not exceed €12,000 per year.

My conclusion is that France’s effective tax base does not allow for economic recovery while also maintaining the political goal of a balanced budget by 2017 and reducing the deficit to 3% of GDP for 2013. Therefore to renegotiate the Fiscal Compact is not enough, especially when the French economy is entering recession. Hollande should review his objectives, namely a balanced budget for 2017 and a reduction to 3% for 2013….

10 May 2012

Il Manifesto

Translation by Revolting Europe

About revoltingeurope

Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

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